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One-Stop Shopping and the BigLaw Balloon

We are quickly approaching the end of Q2 2014 and heading into summer, but the open sky in which BigLaw flies is not likely to provide much rest and relaxation during the warmer months ahead. Relentless market winds offer constant opportunity to our stronger firms to increasingly distance themselves from their less healthy competitors, in particular those simply getting bigger.

A cursory comparison of the AmFlawed 100 ranking chart of America’s top-grossing law firms for the years 2009 and 2013 shows that while only two firms in 2009 exceeded gross revenue of $2 billion (Baker & McKenzie at $2,112,000,000 followed closely by Skadden at $2,100,000,000), five firms surpassed the $2 billion gross revenue mark in 2013: DLA at $2,481,000,000, followed by Baker & McKenzie at $2,419,000,000, Latham at $2,285,000,000, Skadden at $2,235,000,000 and Kirkland & Ellis at $2,016,000,000 — DLA’s jump to the lead of the pack in 2013 representing a more than doubling of their 2009 13th place finish of $1,014,500,000. Moreover, while in 2009 a total of 13 firms enjoyed gross revenue in excess of $1 billion, by 2013 almost double that number or 23 firms had surpassed the $1 billion barrier.

These gross revenue figures indicate an unabated urge to grow bigger presumably based on the premise that one-stop global shopping is an attractive marketing tool in the increasingly interconnected global business environment. While that may be true, big of course is not necessarily strong or healthy; the five most productive firms based on purported revenue-per-lawyer figures ranking only between 13th and 54th on the gross revenue chart, namely: 1) Wachtell, first in RPL at $2,310,000 but only 54th in gross revenue at $601,000,000; 2) Sullivan & Cromwell, second in RPL at $1,590,000 but 13th in gross revenue at $1,278,000,000; 3) Quinn Emanuel, third in RPL at $1,445,000 but 26th in gross revenue at $972,5000,000; 4) Cravath, fourth in RPL at $1,430,000 but only 52nd in gross revenue at $614,000,000; and 5) Simpson Thacher, fifth in RPL at $1,350,000 but 20th in gross revenue at $1,128,500,000.   While the saga of Dewey & LeBoeuf – which ranked towards the top of the AmFlawed chart in all categories across the board the very year they collapsed – dictates that the chart need be taken with salt, it also evidences the fact that big sometimes means dangerously obese but never in and of itself healthy.

That said, we at Hanover Legal always caution our candidates considering a new firm to focus on its health – not its rankings on the AmFlawed 100 chart.

37 Signs That Your Firm May Be Sinking

It does not take a legal market expert to know that the landscape of major law firms is changing like that of the polar ice caps. Since 2000 at least nine firms have collapsed from their perches amidst the Am-Flawed 100 directly into oblivion, namely: Dewey & LeBoeuf, Howrey, Heller Ehrman, Thacher Proffitt, McKee Nelson, Wolf Block, Dreier, Thelen, and Brobeck — or on average one firm every one and a half years.

The Trials and Tribulations of Dewey & LeBoeuf

When Dewey Ballantine and LeBoeuf, Lamb, Greene & MacRae decided in 2007 to join forces to become Dewey & LeBoeuf, mortgage backed securities were still the rage, business was booming and few appreciated the intensity of the storm on the horizon. A mere one year later however, Dewey & LeBoeuf as well as every other major law firm had seen virtually all of its structured finance work disappear and some of those firms were soon to be history.

January 2012 – A Glimpse Back and Ahead

To be clear, 2011 was marked by stability in the world of BigLaw only in a relative sense, 2009 being characterized as perhaps the most tumultuous year in the history of major law firms and 2010 by paralyzing risk aversion and the refrain “flat is the new up.” Lateral hiring of associates and other service oriented attorneys picked up a trickle as the strongest of our major players sought to regain some of the bench strength they had let go in the aftermath of the 2008 Wall Street collapse, the leading pack ever thinning. Trimming and efficiency remained priorities as corporate clients continued to enjoy growing leverage over their law firm advisors, and law firm mergers and acquisitions were abundant as more players found themselves struggling merely to stay afloat while those not fortunate enough to accurately gauge the dangers around them or find healthier players on whom to link were swallowed up by the relentless waters around them.